Problems with the IRS Art Advisory Panel

Art Dealer Ileana Sonnabend, who died at the 92, owned a rare piece of artwork called the “Canyon.” Originally, the piece of art was value at $0 because of its unique composition. The collage contains a bald eagle that was stuffed by artist. Because the collage contains a stuffed bald eagle it cannot be sold. The reason for this is because the seller would be violating two federal laws, which comes with a year in a federal penitentiary. Therefore, the stuffed bald eagle could not be sold and has no value.

The IRS Art Advisory Panel argued, on the other hand, that even though it would be illegal to sell the collage, the value of art is still worth about $65 million, which means that the estate should incur about $29 million in taxes and $11.7 in penalties. The reason that the IRA Art Advisory Panel provided value to the otherwise inalienable piece of art is that they argued that there was still a market to the artwork, even if the market was illegal. 

Now, Sonnabend’s estate has appealed the decision of the IRS. While it is true that the IRS’s reasoning is not new, the sympathy and rightful actions of the defendants in this case could make this difficult for the IRS to litigate. 

See Janet Novack, The IRS Art Advisory Panel Has Its Head In The Clouds, Forbes, July 22, 2012.